2/15/2024

Top 3 popular myths about cryptocurrencies

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The market capitalization of Bitcoin has surpassed the $1 trillion mark, serving as a clear indication of the widespread confidence in this asset. The popularity of cryptocurrencies has experienced substantial growth since their inception in 2009. Despite the recent introduction of the Bitcoin ETF, many still find it challenging to comprehend the intricacies of cryptocurrencies.

This complexity has led to the emergence of myths and rumors surrounding Bitcoin, Ether, and other cryptocurrencies. In light of this, we have chosen to explore and debunk the three most prevalent misconceptions in this space!

Myth 1: They are no value in cryptocurrency

Value is a concept that does not have a universal definition. The same object may have different values for different people, communities or societies. An example is the cryptocurrency Bitcoin: in 2009, after its launch, its value was negligible, but by 2021 it has grown to $69,000 per unit. The rise in Bitcoin’s value illustrates how society’s perception of an item affects its value.

However, it is important to understand: value is not always equal to face value. For example, Ethereum is the basis of the ETH cryptocurrency, which is used to create various decentralized applications and tokens. Ethereum may have a lower dollar value than Bitcoin, but its value lies in its functionality. It is used to create smart contracts, non-fungible tokens (NFTs), and other decentralized financial instruments.

Myth 2: Cryptocurrencies are dangerous

Blockchain is the underlying technology of cryptocurrencies. It is a distributed database protected by cryptographic methods, making it extremely resistant to hacking. When transactions are added to blockchain blocks, information about previous transactions is recorded in new blocks and encrypted.

The block chain is continuously growing, and automatic verifiers must confirm the accuracy of the information contained in transactions. Thanks to encryption, interconnection of blocks and consensus mechanisms, it is almost impossible to change information in the blockchain in order to steal cryptocurrency.

Cryptocurrency’s vulnerability comes from the way it is accessed and stored, such as in cryptocurrency wallets or centralized exchanges that facilitate transactions. While sending cryptocurrency from one user to another is not particularly concerning, the platforms and software used to store and access it may be susceptible to hacking or tampering.

There are methods to ensure the security of cryptocurrency. One of them is storing keys to crypto assets outside of exchanges, in “cold” storage. In addition, the introduction of ETFs contributes to the institutionalization of cryptocurrency, since their approval is subject to verification by government agencies.

Myth 3: Cryptocurrencies will soon replace fiat

For cryptocurrencies to supplant traditional paper currency, widespread adoption by the general population is imperative. Individuals need to shift from using familiar and well-understood money to embracing this novel financial instrument. This transition becomes more plausible once cryptocurrencies establish stability in value and purchasing power. The key catalyst for this shift could be the active use of cryptocurrencies in pricing and payment for goods and services.

However, governments are unlikely to relinquish paper money easily. The current monetary system affords governments control over tax collection and the funding of various government programs. The elimination of taxes could jeopardize essential social programs on which a significant portion of the population relies, leading to potential cuts in other government expenditures.

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